Fuel Prices As We Go over the Top...? (Natural Gas)Libelle, The Oil Drum / Canada
The first question asked by those hearing about fuel depletion is usually: "How high will prices go?". The attitude is almost always that one will just have to pay up, as the fuel is essential. This is of course a recipe for extremely high prices, but just how prices will vary as the depletion process unfolds remains to be seen.

...The question that arises is why the price has fallen so far in an era of dwindling supply. The answer lies partly in the mild winter of 2005/6 and moderate summer of 2006, but the steady shutting down of industry has a large and on-going influence on consumption and on price. Industrial users of gas pay the lowest prices, and are the first to shut down or move their production facilities overseas as the price rises. This acts as a brake on the rise. U.S. industrial consumption of gas fell 22% between 1997 and 2005, and the U.S. has lost three million manufacturing jobs since 2000. Canada will not have been immune to this type of change. The deindustrialisation of North America is already under way, even though "Peak Oil" (and gas) is only just beginning to enter mainstream public debate.

Industrial consumption is still very large, so there yet remains a considerable fraction of the gas demand that can gradually be destroyed at relatively low prices. Will this allow production to decline by say twenty per cent without the price going any higher than it already has? Adding to this effect may be a decrease in gas consumed to make electricity, as deindustrialisation destroys electricity demand too. Will the result be that gas depletion remains partially hidden from public view by the economic downturn that it has helped cause? A collapse of the debt bubble and hence of the US dollar would no doubt cause a major reduction of consumption by all sectors. It is not too difficult to envisage a situation in which real prices do nor rise much, or even fall, while a major decline in gas production is officially explained by economic factors, rather than depletion.
(24 Oct 2006)

An unsustainable outlookCarola Hoyos, Financial Times (UK)
As major oil discoveries become rarer and as motorists face the highest petrol bills in a generation, the debate over whether the world is running out of oil is again rearing its head.

In books, speeches and articles, and particularly on the internet, the doomsayers - known as “peak oil” theorists - are warning that the world’s oilfields are on the decline and will soon be unable to match mankind’s insatiable appetite for energy.

...So, just as the world begins to breathe a sigh of relief, after four years when the price of oil has tripled, the resulting complacency risks starting the cycle anew. Though we may not be running out of oil as peak theorists believe, we risk running out of the ability to pump it from the ground.

The faster we consume hydrocarbons without finding significant alternatives, the sooner we will slam against the political barriers that stop some of the world’s biggest oil and gas fields from being developed.
(23 Oct 2006)A summary that seems better balanced than most; it puts the recent price drop into perspective. Submitter Alfred Nassim writes: "This is the lead article of a 12-page special report on Energy." -BA

Enter Barack ObamaJames Howard Kunstler, Clusterf*ck Nation
...The convulsion that a President Obama might be elected into would be one first of economics. Our industrial economy is going to fall on its knees when global energy scarcities gets traction. There is going to be a scramble for resources world-wide and here in North America, and we are all set up to fracture along ethnic and regional lines as that occurs. The presence of a suddenly overwhelming, non-assimilated Hispanic population will only make things more difficult.

A President Obama would also very probably face a geopolitical crisis as the US, China, Russia, Japan, Europe, and the Islamic nations jockey desperately over energy resources while their own populations grow restive, desperate, angry, and possibly aggressive.
(23 Oct 2006)Any new U.S. President will face a very difficult four years, though perhaps not as grim as Kunstler portrays. An understanding of our energy dilemma will be increasingly important for any political leader or party. -BA

Over the longest possible term, since 1870, oil prices have not reflected predictions made by economic theories of finite (fixed stock) non-renewable resources like conventional oil. Consider the following quote from On the Economics of Non-Renewable Resources [PDF] by Neha Khanna, an excellent introduction to the subject.

Economists add another dimension to this distinction between renewable and nonrenewable resources. Since economics is concerned with the allocation of scarce resources, for an economist non-renewable resources not only have a fixed stock, they are also in limited supply relative to the demand for them. Thus, old growth trees with life spans of as much as 1000 years while renewable by the common definition, may be classified as non-renewable by economists due to their relatively slow growth to maturity and few remaining stands....

Similarly, while coal would be considered non-renewable by some, most resource economists would consider it renewable due to the vast remaining stock. At current rates of consumption of about one billion tons per year, it is estimated that there is enough coal to last approximately 3000 years. From an economic perspective, there is no immediate coal scarcity simply due to its fixed stock. It is as if it were renewable. There is no scarcity rent associated with its extraction.

This essay will ultimately argue for the startling hypothesis that what Khanna says regarding coal also holds for oil in the market and finally comment on the tragic near-term consequences for humankind of this false & misleading market signal
(23 Oct 2006)

Chevron's Big Oil ambassadorCiaran Hancock, UK Times
[Chevron’s chairman and chief executive, Dave O’Reilly] has emerged from the closed world of Big Oil firmly on the front foot. Not aggressive, but certainly off the defensive.

In the era of soaring prices at the pumps, enormous profits, global warming and the film Syriana, it’s been a pretty ballsy strategy.

O’Reilly admits his public stance was a conscious decision. “The message about energy is an important one, and it’s important to get the debate started.”

His message is that Big Oil is not as big as people think, that oil has not peaked, that there is no alternative energy source that will be an immediate panacea. To serve future demand, including the estimated 1.5 billion people on the planet that have no electricity, the world will need all the energy it can get.

“We are going to have to work all the angles,” O’Reilly says in a California drawl. “There is no silver bullet.”

...Yet O’Reilly does not buy into the concept of “peak oil”, the idea that reserves are in a terminal decline. “There is more out there. What people have to realise is that it’s going to take time.”
(22 Oct 2006)

What Peak? Oh, that PeakPuke Green
A few months ago when oil prices were regularly breaking new highs, I repeatedly wrote about the oil crisis. It is only fair that I similarly acknowledge the recent drop in oil prices. I don’t want to be the sort of person who only gloats when he is clearly proven right, and then hides in a bathroom stall when he appears to be proven wrong.

As I’ve written before, the recent drop in prices is not a sign that the oil crisis (or “peak oil”) was fake or has been avoided. It doesn’t take a habitual pessimist to see that almost all evidence points to an increase in oil prices over coming years, not a drop. Although the current price is the lowest this year, oil still costs roughly four times what it did in 1999. This current dip is merely a short term variation in an overall upward trend.
(22 Oct 2006)